Hackett: Finance Leaders See Cost Containment and Cash Flow Optimization as Top Priorities for 2024

Rhea-AI Summary

Finance leaders are prioritizing cost containment and cash flow optimization in 2024 due to economic uncertainties. The Hackett Group's research highlights the focus on digital transformation, AI, and Gen AI to enhance efficiency and productivity. Despite challenges in labor and talent, finance executives are confident in achieving objectives like profitability goals and digital transformation.

Insights

Financial Analyst

Finance leaders are evidently pivoting towards cost containment and cash flow optimization as primary objectives, signaling a defensive strategy in anticipation of economic headwinds. This shift underscores the importance of liquidity and operational efficiency during times of uncertainty. The projected increase in finance workloads coupled with a decrease in staffing and budget further indicates that companies are bracing for a need to do more with fewer resources.

From an investment standpoint, the emphasis on digital transformation, particularly through AI and Gen AI, suggests that technology sector companies that provide these services could experience sustained demand. However, the confidence level in achieving objectives related to digital transformation is low, hinting at potential challenges in implementation, which could affect the timelines and ROI of these technology projects.

Market Research Analyst

The research highlights a significant net adoption growth rate in core and emerging finance technologies, which reflects a broader market trend of digital enablement across industries. The focus on business process management, virtualized data platforms and robotic process automation indicates a market leaning towards tools that can drive efficiency and scalability. Companies specializing in these areas might see increased interest from investors as they become critical enablers for finance operations.

Moreover, the interest in Gen AI indicates a nascent market with substantial growth potential. Companies at the forefront of Gen AI could become attractive investment opportunities as their technologies mature and adoption widens.

Economist

The shift in finance leaders' priorities from growth to cost containment and cash flow optimization is reflective of a broader economic sentiment preparing for a potential downturn. This strategic realignment can have macroeconomic implications, potentially leading to reduced corporate spending and investment, which could contribute to a slowing economy. However, the increased investment in digital automation could drive productivity gains that might offset some of the negative impacts of reduced spending in other areas.

Finance Leaders Also Continue to Focus on Digital Automation to Shrink Significant Productivity and Efficiency Gaps

MIAMI--(BUSINESS WIRE)-- Cost containment and cash flow optimization have jumped to the top of the priority list for finance leaders for 2024, in response to an uncertain economic outlook, potential for slowing or stalling of global growth, and the unprecedented confluence of inflationary price increases, rising interest rates, supply market challenges, and geopolitical instability, according to new Finance Key Issues research from The Hackett Group, Inc. (NASDAQ: HCKT).

Finance leaders will also need to do more with less operationally in 2024 because they expect to see a 5% increase in finance workloads and a slight decrease in staffing and operating budget, The Hackett Group^® found.

Digital transformation remains a top five priority for finance in 2024, the research found. Technology investments are one area where spending will actually increase in 2024, driven by digital transformation and efforts to implement artificial intelligence (AI) and generative AI (Gen AI). Overall, finance leaders continue to focus on digital transformation, using technology investments to reduce costs and create new capabilities. Net adoption growth rates for both core and emerging finance technologies are expected to be strong in 2024, with the greatest growth in areas such as business process management (18%), virtualized data platforms (15%), digital workforce enablement tools (13%) and robotic process automation (13%). Gen AI growth of 9% is expected, with 41% of companies expecting to implement pilots or small-scale deployments.

While finance and other business functions are still in the early stages of exploring Gen AI, enterprise funding is expected to increase in 2024, the research found. The most promising opportunities for finance to benefit from Gen AI include account-to-report, management reporting and planning, and forecasting processes – areas where easy access to accurate data can greatly enhance the effectiveness of personnel. Many finance leaders also see an opportunity for using Gen AI in business performance support, including amplified analytics, intelligent task automation, conversational agents for service requests and natural language processing for translation of narratives.

Turning data into actionable insights, profitability goals and margin expansion, and digital transformation rounded out the top five finance priorities for 2024. Overall, traditional finance objectives dominate this year’s priority list, with six of the top 10 objectives in this category, including improving forecasting reliability (priority No. 6), regulatory compliance (priority No. 9), and capital investment allocation and deployment (priority No. 10). Despite persistent labor and talent issues, there is only one talent-related objective for 2024 – upskilling existing talent (priority No. 7). In most cases, finance executives are fairly confident in their ability to achieve these objectives. Areas of lowest confidence on the 2024 priority list include forecasting reliability, digital transformation, master data management and upskilling talent. In the cases of data and digital transformation, low confidence is likely due to the accelerating rate of change, the skills required to architect solutions, and the complex nature and span of effort required to make progress.

A complimentary version of The Hackett Group’s 2024 Finance Key Issues research, “The CFO Agenda,” is available, with registration, at https://go.poweredbyhackett.com/w28.

“Last year, growth was the clear top priority for finance leaders. But concerns over the global economic climate have driven a significant shift in their thinking,” said Senior Research Director Shawn Fitzgerald. “Growth didn’t even make the list this year, and cost containment and cash flow optimization jumped from the bottom half of last year’s list to the top two spots for 2024. Profitability goals and margin expansion also moved into the top five.”

Principal Tom Willman added that, “Finance leaders will face significant operational challenges in 2024 as well. While the projected productivity and efficiency gaps have shrunk somewhat since last year – down from 9% and 10% respectively to 6% – they are still significant. The good news is that the path to reducing costs is clear. Our most recent benchmark analysis shows that Digital World Class^® finance organizations operate at about half the cost of their peers, which represents a $48 million advantage for a typical $10 billion company. One key to this is digital transformation, including high levels of automation for core transactions.”

“Finance must take a deliberate, sustainable approach to cost optimization rather than one-off belt tightening, and develop new ways to reduce costs,” Willman continued. “Finance organizations would be wise to explore generative AI as part of this, as it holds huge promise. Our recent research finds that generative AI could enable finance and other selling, general and administrative functions to reduce cost and staffing by up to 40% over the next five to seven years. Now is the time to be planting the seeds for this potential paradigm shift in delivery model and cost structure.”

The Hackett Group’s 2024 Key Issues research is based on results gathered from more than 375 executives in finance, procurement, supply chain, human resources, information technology, and global business services at a global set of midsized and large enterprises.

About The Hackett Group

The Hackett Group, Inc. (NASDAQ: HCKT) is a leading benchmarking, research advisory and strategic consultancy firm that enables organizations to achieve Digital World Class^® performance.

Drawing upon our unparalleled intellectual property from more than 26,000 benchmark studies and our Hackett-Certified^® best practices repository from the world’s leading businesses – including 97% of the Dow Jones Industrials, 89% of the Fortune 100, 70% of the DAX 40 and 55% of the FTSE 100 – captured through our leading benchmarking platform Quantum Leap^® and our Digital Transformation Platform, we accelerate digital transformations, including enterprise cloud implementations.

For more information on The Hackett Group, visit: https://www.thehackettgroup.com/; email info@thehackettgroup.com; or call (770) 225-3600.

The Hackett Group, Hackett-Certified, quadrant logo, World Class Defined and Enabled, Quantum Leap, and Digital World Class are the registered marks of The Hackett Group.

Cautionary Statement Regarding “Forward-Looking” Statements

This release contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Statements including without limitation, words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” seeks,” “estimates,” or other similar phrases or variations of such words or similar expressions indicating, present or future anticipated or expected occurrences or outcomes are intended to identify such forward-looking statements. Forward-looking statements are not statements of historical fact and involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. Factors that may impact such forward-looking statements include without limitation, the ability of The Hackett Group to effectively market its digital transformation and other consulting services, competition from other consulting and technology companies that may have or develop in the future, similar offerings, the commercial viability of The Hackett Group and its services as well as other risk detailed in The Hackett Group’s reports filed with the United States Securities and Exchange Commission. The Hackett Group does not undertake any duty to update this release or any forward-looking statements contained herein.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240213947982/en/

Gary Baker, Global Communications Director - (917) 796-2391 or gbaker@thehackettgroup.com

Source: The Hackett Group, Inc.

FAQ

What are the top priorities for finance leaders in 2024 according to The Hackett Group's research?

The top priorities for finance leaders in 2024 include cost containment, cash flow optimization, digital transformation, AI, and Gen AI.

What technology investments are expected to increase in 2024 based on The Hackett Group's research?

Technology investments in digital transformation, AI, and Gen AI are expected to increase in 2024.

What are the areas of expected growth rates for finance technologies in 2024 according to The Hackett Group's research?

Expected growth rates for finance technologies in 2024 include business process management, virtualized data platforms, digital workforce enablement tools, and robotic process automation.

What are the opportunities for finance to benefit from Gen AI according to The Hackett Group's research?

Finance can benefit from Gen AI in areas such as account-to-report, management reporting and planning, forecasting processes, and business performance support.

What are the key priorities for finance leaders in terms of traditional objectives in 2024 according to The Hackett Group's research?

Traditional finance objectives like improving forecasting reliability, regulatory compliance, and capital investment allocation are key priorities for finance leaders in 2024.